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Author Topic: Prediction market in a block chain ?  (Read 1423 times)
Anonymous
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May 02, 2011, 06:44:33 AM
 #1

Just say you make a prediction and broadcast it to a network of nodes by spending a coin which confirms your transaction and thus embeds the prediction in a block chain....the coins go to the miners of the block chain to incentivise mining it. Any node could see any prediction and people could setup "prediction exchange clients" you could install that possibly interacted with bitcoind.


Governments would never allow a prediction market using centralised infrastructure so this gets around it. Good/bad or ugly idea ?

Im up to raise capital to get it done if anyone is interested using glbse.com




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May 02, 2011, 11:24:11 PM
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Just say you make a prediction and broadcast it to a network of nodes by spending a coin which confirms your transaction and thus embeds the prediction in a block chain....the coins go to the miners of the block chain to incentivise mining it. Any node could see any prediction and people could setup "prediction exchange clients" you could install that possibly interacted with bitcoind.

Biggest issue I can see would be publishing/grading of predictions.  A block-chain based trust/reputation infrastructure could allow for self-grading with users without a history of honesty paying much higher premiums.

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Governments would never allow a prediction market using centralised infrastructure so this gets around it. Good/bad or ugly idea ?

I guess it depends on what you're predicting, but I suspect that Intrade provides evidence that governments are fine with allowing prediction markets using centralized infrastructure.  Hell, betfair and the other betting exchanges are arguably prediction markets and there's only really one government I can think of that has a major problem with them.

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May 03, 2011, 04:41:44 AM
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Let's say a person (the house, let's call them) took a number of Bitcoin and converted it into two rival currency: Pro-event and anti-event. They then sell them at some initial probability such that pro + anti = 1. Each of these currency would be traded on the market. If overall people thought there was an 80% chance of X event happening, pro-X coin would sell at 0.80 Bitcoin and anti-X coin would sell at 0.20 Bitcoin. If pro+anti is more than or less than 1, that's a signal to the house to sell more or buy back coin. When the event happens (or doesn't happen), the house merely needs to release the information that allows people to cash one or the other in for Bitcoin, at 1:1. Perhaps both could be redeemed if both keys were released, but people wouldn't be able to redeem for more than the account holding the actual Bitcoin contains, someone would unfairly lose.

There's no way around having a "central" account and house to referee the event, but the market values of the pro- and anti- coin would reflect the trust in them. But it is certainly decentralized because there is no server to take down.
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